Updated Facebook Page Serves as Leading Indicator

Sept. 25 (Bloomberg) -- You could say that Myanmar won over
Kevin Murphy at “min-ga-la-ba,” or “hello” in Burmese. The
American first came to this isolated land in the 1980s as a
student and returned in the 1990s as a journalist. In 2002, he
came back again -- this time for good and as an investor.

“You can say I was hooked early on,” Murphy, 51, said in
Myanmar’s capital, Naypyidaw, recently. “It’s nice to see the
rest of the world catching on.”

And how. EuroMoney’s debut event in the nation that Rudyard
Kipling once called “quite unlike any place you know about”
attracted almost 900 participants. It was the largest influx of
foreign investors Myanmar’s 55 million people have ever seen.
More than 100 years later, Kipling is still right about Myanmar,
formerly known as Burma, being a world apart.

Bankers visiting for the first time assumed travel agents
were exaggerating about BlackBerrys and smart phones not working
(they really don’t). They dismissed warnings that credit cards
aren’t accepted, even at five-star hotels. All that blather
about banks and merchants only taking pristine $100 bills (the
slightest crease or fold and you’re toast) seemed overdone,
until you found your wad of cash worthless and wondering how to
pay for dinner. No, Myanmar isn’t easy.

Unlike China

On the bright side, Twitter works fine in a place that just
a year ago was both a pariah and police state, a contrast with,
say, China. You can update your Facebook page anytime you can
find a WiFi signal, again something you can’t do in China. I was
able to view YouTube clips of the violent 2007 crackdown on
protesters by the military junta that ran the place before
President Thein Sein unleashed reforms that took the world by
surprise. Try typing “Tiananmen Square massacre” into search
fields while visiting China. You are routed to tourism sites.

“What the world must understand is Myanmar’s opening is
real and irreversible,” said Murphy, a managing director at
Andaman Capital Partners Ltd. in Yangon, also known as Rangoon.
“Really, take it from someone who has been here through
previous moments of hope that change was happening. It shouldn’t
be doubted.”

The China comparison is worth exploring further. China
opened its economy without corresponding reforms to its
political system. It retains an iron grip on freedom of speech,
the press and the political narrative. Myanmar is doing the
opposite: It’s opening socially and politically before it even
has an economy of which to speak. That is creating higher
expectations than many Chinese have of their leaders.

Inclusive Growth

Burmese tycoon Serge Pun put it well: “A year ago, our
people were afraid of the government; now the government is
afraid of the people. If our leaders don’t deliver, and soon,
with inclusive growth, things will get difficult and they know
it.”

Myanmar’s challenges are daunting. There are huge question
marks about the role and influence of the military. What if,
skeptics ask, the military fails to respect a victory by Aung
San Suu Kyi’s party in the next election in 2015? Confusion
reigns over a recently passed investment law. How much access
will foreigners really have to Myanmar’s natural resources? Too
little? Too much?

Ethnic conflict is another challenge. Those in the West who
idolize Suu Kyi might be surprised to know her reputation at
home is more mixed. Her silent treatment of the minority
Rohingya Muslims irks human-rights groups and is a blemish on
her status as a Nobel Peace Prize winner.

Chinese Pressures

Myanmar is already facing pressures that China didn’t until
recently. The widening gap between rich and poor is a source of
growing friction among China’s 1.3 billion people. Discontent is
rising amid reports of the obscene wealth being amassed by
members of a ruling party that is communist in name only.

Since Myanmar won’t have the luxury of ignoring these
risks, its development may go smoother than, say, Vietnam’s,
which investors often compare with Myanmar. Vietnam is seen as a
prisoner to pendulum economics: Investor sentiment swings from
heady optimism to dark pessimism.

Vietnam hasn’t built the institutions or found the right
regulatory structure to shield itself from the whims of hot
money. So, last month when police arrested banking mogul Nguyen
Duc Kien on vague charges that many feared smacked of politics,
local markets tumbled. When the plight of one man imperils your
economy, you have serious problems.

Myanmar can avoid these boom-bust cycles by getting the
basics right today. That means telling investors clamoring to
cash in on one of Asia’s last frontier markets to take a deep
breath and be patient. Myanmar must craft investment laws that
benefit the broader population.

“The issue is building blocks,” said Irish entrepreneur
Denis O’Brien, the founder and chairman of Digicel Group, a
mobile-phone-network operator. “It’s important for an economy
to be able to walk before it can run.”

Myanmar probably doesn’t aspire to become one of the Asian
“tiger” economies -- it wants to be its own. With any luck,
Kipling will still be right about the place a century from now.

(William Pesek is a Bloomberg View columnist. The opinions
expressed are his own.)